Tesla is facing lawsuits in both Massachusetts and New York from members of the Automotive Trade Association, saying that the electric-car maker is operating illegal dealerships in those states.

Factory-owned dealerships are prohibited in many states according to the National Automobile Dealers Association. ”The big question for a lot of the states is do they have the kind of statute that addresses the issue of who’s allowed to be licensed to sell cars for their particular state,” said Mark Schienberg, president of the Greater New York Automobile Dealers Association.

Tesla says its boutiques are showrooms and nothing more. Instead, customers are directed to the company’s website for purchases. According to Tesla, the company complies with federal and state laws everywhere they are set up.

“They claim they’re operating under the guise of a non-sales showroom, and we call that out as an outright scam,” Robert O’Koniewski, executive vice president of the Massachusetts association said. These factory stores represent a problem to the association because they have a larger budget for advertising and facilities compared to dealers that are part of the association.

“We are looking down the road — what happens with China, what happens with India, with other manufacturers that come into the market,” he said. “We’re concerned about the precedent this sets.”

[Source: Automotive News]

By Stephen Elmer